Market Update 10 May 2014: New Highs?

This week had every single asset category showing a loss. The smallest drop was in the Canadian Dollar, while the largest drops were in coffee, down 9.0%, and gold stocks, off 3.9%. Meanwhile, the mainstream media has been full of articles trumpeting new all-time highs for the Dow Jones Industrials and the S&P 500 stocks. Of course, these are meaningless statements, as the dollars used to define these markets are heavily manipulated by the Federal Reserve. As the chart below shows, stocks in the real world are nowhere near new highs; in fact, despite a very good year in 2013, they are about 30% below their 2007 highs, and a whopping 70% down from their 2001 highs.

In other news:

Despite a 2.1% drop this week, the Long bonds are still safely inside their rising channel. If you own TLT, I'd continue to hold it.

Gold stocks may be forming a "head and shoulders" bottom, but I would like to see a close above 6 g before becoming bullish, and a close above 6.5 g would be much more convincing. Silver continues to languish near its multi-year lows with no signs of recovery in sight.

Note that gold stocks and silver are the only asset classes that are lower now than they were a year ago. Their "rubber bands" are stretched really tight; when they begin to recover, they could go ballistic… but there is no telling how long that might take to happen, and it is entirely possible that they could go even lower before they begin their recoveries.